The Continuing Puzzle of Short Horizon Exchange Rate Forecasting Export

@article{citeulike:3773414, abstract = {Author contact info: Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 232 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu Vania Stavrakeva The Brookings Institution 1775 Massachusetts Avenue, N.W. Washington, DC 20036 E-Mail: vania.stavrakeva@gmail.com Are structural models getting closer to being able to forecast exchange rates at short horizons? Here we argue that misinterpretation of some new out-of-sample tests for nested models, over-reliance on asymptotic test statistics, and failure to sufficiently check robustness to alternative time windows have led many studies to overstate even the relatively thin positive results that have been found. We find that by allowing for common cross-country shocks in our panel forecasting specification, we are able to generate some improvement, but even that improvement is not entirely robust to the forecast window, and much of the gain appears to come from non-structural rather than structural factors.}, author = {Rogoff, Kenneth S. and Stavrakeva, Vania}, citeulike-article-id = {3773414}, citeulike-linkout-0 = {http://www.nber.org/papers/w14071}, citeulike-linkout-1 = {http://www.nber.org/papers/w14071.pdf}, journal = {National Bureau of Economic Research Working Paper Series}, keywords = {forecast, fx, microstructure}, month = {June}, pages = {14071+}, posted-at = {2008-12-11 10:13:39}, priority = {2}, title = {The Continuing Puzzle of Short Horizon Exchange Rate Forecasting}, url = {http://www.nber.org/papers/w14071}, year = {2008} }

TY - JOUR ID - citeulike:3773414 L3 - citeulike-article-id:3773414 N2 - Author contact info: Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 232 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu Vania Stavrakeva The Brookings Institution 1775 Massachusetts Avenue, N.W. Washington, DC 20036 E-Mail: vania.stavrakeva@gmail.com Are structural models getting closer to being able to forecast exchange rates at short horizons? Here we argue that misinterpretation of some new out-of-sample tests for nested models, over-reliance on asymptotic test statistics, and failure to sufficiently check robustness to alternative time windows have led many studies to overstate even the relatively thin positive results that have been found. We find that by allowing for common cross-country shocks in our panel forecasting specification, we are able to generate some improvement, but even that improvement is not entirely robust to the forecast window, and much of the gain appears to come from non-structural rather than structural factors. JF - National Bureau of Economic Research Working Paper Series TI - The Continuing Puzzle of Short Horizon Exchange Rate Forecasting SP - 14071 KW - forecast KW - fx KW - microstructure AU - Rogoff, Kenneth AU - Stavrakeva, Vania PY - 2008/June// UR - http://www.nber.org/papers/w14071 ER -